Vanguard Global Minimum Volatility Fund (VMVFX) is a compelling option for risk-averse investors. Its managers attempt to offer lower volatility than the FTSE Global All Cap Index, which includes both U.S. and foreign stocks. To do this, the managers select stocks from this index using an optimization approach that takes into account each stock's historical volatility, factor exposures, and the correlation between these stocks. But they also constrain this model to limit sector and country tilts from this index and to try to keep individual positions small. In order to further mitigate risk, the managers hedge the fund's foreign currency exposure.

This is a rules-driven approach that does not rely on qualitative security selection. But the managers do have some flexibility to trade patiently to reduce transaction costs, and they may adjust the model as necessary in order to more effectively manage risk.

The portfolio tends to underweight cyclical sectors like financial services, and overweight more defensive sectors such as utilities [relative to the FTSE Global All Cap Index]. It also tends to have a smaller-cap tilt than the FTSE Global All Cap Index. These characteristics, together with the fund's defensive posture and currency hedging, can cause it to perform quite differently than the broader market.

Like most low-volatility strategies, this fund will likely lag during strong bull markets. But it should make up for this during market downturns and offer a more favorable risk/reward trade-off than the broader market over a full market cycle. So far, the fund has accomplished what it set out to do. From January 2014 through November 2015, the fund exhibited less than two thirds of the volatility of the FTSE Global All Cap Index. Its Investor share class charges a very low 0.30% expense ratio, which further bolsters its case and makes this a very compelling option for risk-averse investors.